Nearly two years after Motorola split into Motorola Mobility and Motorola Solutions, the venture groups affiliated with each entity have divided up the old portfolio and are hitting their stride with new investments.

Placing early-stage bets–normally $2 million to $5 million each– on tech startups that could later have a strategic value for Motorola Solutions, its venture group, Motorola Solutions Venture Capital, does roughly seven deals a year in the enterprise, government and retail sectors.

Managing Director Reese Schroeder talked about how companies get acquired by the mother ship, detailed technology gaps in Motorola Solutions that he’s working to fill and explained why he never wants to see another materials deal again. Here is the edited interview:

Looking at your portfolio, it seems like you have distinct clusters of technology, like video and photo recognition, security and biometrics and data analytics. What am I missing?

Next-generation retail technologies and location are also important to us. Another emerging space of interest is in the area of sensor and sensor networks. Our investment in SST is in a wide-area acoustic-sensor network, for example.

How much of your investments are in cutting-edge technology versus an iterative improvement?

There’s a mix. If a startup has technology that they’re targeting to one of our sectors then those are interesting to us. Some are new technology that didn’t exist 5 years ago like (photo-recognition company) IQ Engines.

How much back and forth is there between Motorola Solutions and your startups? In other words, do you stay updated on their R&D projects and to what extent do you use that as an investing guide?

We are very tied into what’s being developed internally here. We stay in constant contact and meet regularly with the CTO and engineers. It’s our lifeblood to stay close to what’s being developed internally. We look for where the gaps are and ask ‘what are the things that we should be developing internally that we’re not.’ Knowing that is a very important part of our success.

Unlike some corporate VCs, you are not charged with investing for financial success. You invest for purely strategic reasons, according to information on your Web site. How does that work out?

We are laser-focused on whether a company has a current or future strategic fit with our business, but we will not invest if the company is not successful financially. It needs to be both. Our company expects us to have financial success.

What was your IRR last year?

We don’t release that, but I can say we do quite well. That’s why we’ve been here for 14 years.

Does Motorola Solutions see every deal before it’s acquired? For example, did Motorola get first look at acquiring your portfolio companies DesignArt Networks and Apertio before Qualcomm and Nokia Siemens Networks bought them?

We will typically ask for a right to be notified if there’s an event, but we don’t ask for any rights that are difficult for the other venture investors to accept. We want to be good co-investors.

Ever been outbid on an acquisition?

Not that I know of.

What’s a gap in Motorola Solutions that you’re looking to fill now?

We are always looking for compelling software solutions that will provide next-generation public safety information to the officer on the street. Our device business is geared toward enterprise and public safety. We are also looking for next-generation retail technologies.

What’s something you never want to see again?

Well, never say never, but material plays in general are tough because they have such a long life cycle. Early in the group’s existence we did a few, but because of the long cycles it’s hard to get the strategic and financial (returns) to work.

Are you finding the deal flow you need?

You have to work hard to find the right companies. Back when we were Motorola, you could find mobile deals everywhere. Now we have to work hard and be in the ecosystem.

How do you find deals?

Probably 70% come from other VCs, both strategic and financial. We also get some from investment bankers, our own business and of course universities and incubators.

About Venture Capital Dispatch

Produced by the editors of Dow Jones VentureWire, Venture Capital Dispatch tracks the fast-moving developments at the intersection of high-tech innovation and venture capital finance. Featuring the VentureWire reporting team in the Silicon Valley, New York, Boston and Shanghai tech centers, Venture Capital Dispatch provides insight into the newest start-ups and latest trends in venture capital investing. Write us at VCdispatch@dowjones.com. For more information on Dow Jones products covering venture capital and other financial markets, go to http://pevc.dowjones.com.